By Cydney Posner

Corporate Counsel reports this morning on a NY case, The Bank of New York v. BearingPoint, Inc., in which the court held on summary judgment that a company’s failure to file Exchange Act reports when required by the SEC did constitute an event of default under a convertible bond indenture. Note that the indenture required that the company file the reports with the trustee when they were filed with the SEC, but did not expressly impose an independent obligation to file SEC reports. Nevertheless, the court found that the obligation was implicit: failure to file would vitiate the clear purpose of the indenture to provide information to investors so that they could protect their investment. As noted in my email of August 29,2006, many companies have been late in filing their Exchange Act reports or have been unable to file altogether as a result of option dating investigations, and many hedge funds are declaring, or threatening to declare, delinquent filers to be in default and to accelerate the entire underlying debt obligation.

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